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Can Korea Pull The Thorn From Its Foot?

January 15, 1995

Books

CAN KOREA PULL THE THORN FROM ITS FOOT?

TROUBLED TIGER

Businessmen, Bureaucrats, and Generals in South Korea

By Mark L. Clifford

M.E. Sharpe 357pp $55/ $19.95 paper

As the developing world searches for a new economic model after the collapse of socialism, technocrats from Beijing to Cairo gaze enviously at South Korea. Thanks to meticulous planning, Korea transformed itself in three decades from one of the world's poorest nations to one poised to join the ranks of the richest. It is the only Third World nation to become a global export powerhouse with its own brands of semiconductors, appliances, and cars.

But can the state-led, highly nationalist policies of the late dictator Park Chung Hee work for other countries in the increasingly integrated global economy? For that matter, can they keep working for Korea? Not in the view of Mark L. Clifford, business editor of Hong Kong's Far Eastern Economic Review. In Troubled Tiger: Businessmen, Bureaucrats, and Generals in South Korea, Clifford credits much of Korea's success to a level of protectionism and state control that trading partners and international leaders probably wouldn't tolerate if they were launched today.

Indeed, despite its wealth, South Korea seems incapable of soon embracing the global movement toward a free flow of goods, technology, and capital, says Clifford. And while Japan still seems able to get away with such mercantilism, South Korea lacks Japan's manufacturing prowess and huge capital surpluses. Unless Seoul remakes its system, says Clifford, its mighty chaebol, or business groups, "will be pushed to the sidelines of the international economy."

Although such gloom seems excessive, given South Korea's 7% annual rate of economic growth, Troubled Tiger is one of the better books on the Korean "miracle." Clifford has made his political-economic history surprisingly gripping by focusing on the fascinating people behind the policies--among them strongman Park, who ruled with both brutality and inspiration for two decades, and the impressive cast of technocrats who took over after his 1979 assassination.

A former Seoul correspondent, Clifford interviewed key technocrats to develop the big picture. His narrative is made compelling by the many calamitous events that rocked Korea in the 1980s and influenced its economic path--the military's 1980 massacre of protestors in Kwangju, the destruction of Korean Air Flight 007 by the Soviets, the 1983 Rangoon bombing that killed 17 Korean officials, and a raft of scandals that followed the end of military rule in 1987.

The book is refreshingly balanced. The reader gains great respect for the boldness and vision of Park, who put Korea on the map with high-risk bets on huge steel mills, shipyards, and auto complexes. Even as state-led efforts to develop advanced industries in India, China, Eastern Europe, and Brazil failed, Korea's succeeded, largely because Park made companies focus on exports. Products had to meet international standards of quality and cost-efficiency, and companies that failed in world markets had their credit cut off.

The reader even develops sympathy for the much maligned Chun Doo Hwan, who ruled for seven years after seizing power in 1980. A military man who knew his limitations, Chun submitted diligently to extensive late-night tutoring by economic planners.

But Clifford also lays out the brutal side of Korea's triumph--the oppression of dissidents and unions and the coercion of the private sector. While Japan's business groups have their own banks, Korea's financial system was state-monopolized, so government planners dictated every facet of industry and trade. To keep access to credit, companies had to make huge "donations" to the ruling party and, under Chun, to "charities" fronting for his family.

Where Clifford falls short is in backing up his assertion that Korea is unlikely to change. He is hardly alone in seeing Korea's economy as burdened by structural weaknesses. And countries that might follow Korea's example are wary of interventionist policies, though such moves can jump-start development.

But Clifford devotes few pages to analyzing Korea after democracy. He is dismissive of Kim Young Sam, who became President in February, 1993. Kim has been timid about honoring promises to cut state interference in the market. And because he has used trials, ostensibly politically motivated, to persecute executives tied to Park and Chun--such as Hyundai Group founder Chung Ju Yung--Clifford views him as just one more mandarin suspicious of businessmen. Most leaders, Clifford writes, have "at best, a lukewarm commitment to a new way of doing business."

This assessment seems hasty. Since early 1994, when Clifford ended his research, there have been many signs that Korea is proceeding with plans to bring its foreign-investment laws, trade codes, and capital markets in line with international standards of openness by 1998. And, as Clifford shows, Korean planners over the past 20 years have been willing to take tough action to preserve economic health.

And the economy? In 1994, it grew 7.8%, and it should grow by at least 7% again in 1995. Korea's auto and semiconductor industries continue to overcome periodic setbacks and increase global market share. Still, readjustment under democracy won't be easy. Troubled Tiger excels at showing the high price of a long obsession with growth.By PETE ENGARDIO